On Thursday, BofA Securities updated its outlook on NASDAQ:PDD, raising its price target for Pinduoduo (NASDAQ:PDD) Inc. to $206 from the previous $191, while reiterating a Buy rating. The adjustment follows Pinduoduo's impressive first-quarter performance, which saw revenue and profit exceed expectations.
Pinduoduo reported a 131% year-over-year revenue growth, reaching 87 billion RMB and surpassing consensus estimates by 13%. A notable increase was observed in online marketing revenue, which grew by 56% year-over-year, attributed to an estimated 29% growth in Gross Merchandise Volume (GMV) and an improved ad monetization rate of 4.20%, up from 3.41% the previous year. Transaction services revenue saw an even more significant surge, growing by 327% year-over-year, primarily driven by additional commission revenue from TEMU and the China marketplace.
The company's non-GAAP net profit improved dramatically by 202% year-over-year to 30.6 billion RMB, almost doubling the consensus estimate of 15.5 billion RMB. This record high margin of 35.3% was bolstered by several factors, including improved TEMU unit economics, which saw a reduction in loss per order to $3-4, and Duoduo Grocery turning a profit as its main competitor, Meituan, scaled back in the segment. Additionally, continued optimization of domestic marketplace margins contributed to the strong financial results.
Looking ahead to 2024, BofA Securities forecasts a 24% year-over-year growth in domestic GMV and a significant increase in TEMU GMV to $56 billion, up 222% year-over-year. The non-GAAP net profit for 2024 is estimated to reach 130 billion RMB, accounting for a projected 25 billion RMB loss from TEMU. The firm has raised its 2024-2025 non-GAAP net profit estimates by 38-72% to reflect a better growth and margin outlook and adjusted the discounted cash flow-based price objective accordingly.
InvestingPro Insights
Following BofA Securities' optimistic update on Pinduoduo, InvestingPro data further highlights the company's financial health and market performance. Pinduoduo holds a strong market capitalization of $204.27 billion, reflecting its significant presence in the market. The company's P/E ratio stands at 19.27, which is appealing when paired with its PEG ratio of just 0.28, indicating potential for growth relative to earnings. Moreover, with a substantial revenue growth of 105.55% in the last twelve months as of Q1 2024, Pinduoduo's financial trajectory appears to be on a steep upward trend.
InvestingPro Tips for Pinduoduo reveal a company that is not only a prominent player in the Broadline Retail industry but also one that holds more cash than debt on its balance sheet, suggesting a strong financial position. Analysts anticipate sales growth in the current year, and the company's impressive gross profit margins of 61.83% further cement its profitability prospects. For investors interested in a deeper dive into Pinduoduo's performance, there are 19 additional InvestingPro Tips available, offering a comprehensive analysis of the company's financials and market position.
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